Financial Restatement,Executive Change And Executive Compensation

In recent years,the phenomenon of financial restatement at home and abroad has become increasingly frequent,disrupting the capital market order.As a ubiquitous way of information disclosure,financial restatement means that the authenticity and reliability of previous financial reports are problematic,which has attracted the attention of accounting scholars and regulatory agencies.The consequences of financial restatement often result in negative market reactions,affecting the company's reputation,and are easily questioned by regulators and investors.As a reputational punishment,an effective corporate governance mechanism will respond when management jeopardizes shareholder wealth for personal gain.At this time,will the shareholders and the board of directors make certain adjustments to the salary in order to restore the company's reputation or effectively implement the incentive and restraint mechanism of the compensation contract?At the same time,in order to punish executives for violations of generally accepted accounting principles,will the company compensate for the losses caused by financial restatements through personnel changes,and will it cause the executive changes after financial restatement?And when the financial restatement causes the executive changes,will shareholders and the board of directors re-adjust the executive compensation?If the executives do not change,will the negative market reaction of financial restatement cause a decline in performance,and in order to restore the company's reputation,can the compensation constraint mechanism work?These are the concerns of this paper.In this context,this paper uses a combination of normative analysis and empirical analysis.On the basis of combing relevant literature at home and abroad,based on principal-agent theory,corporate governance theory and corporate reputation theory,this paper analyzes the economic consequences of financial restatement.The Shenzhen-Shanghai A-share listed companies with the supplementary correction announcement issued in 2011-2016 are selected as research samples,and the paired samples are selected according to the year,industry and asset size.This paper studies the impact of financial restatement on executive compensation through empirical methods.Moreover,after adding the executive change factors,this paper analyzes the effect of financial restatement on executive compensation after the financial restatement behavior occurs after the executive changes and does not change.This paper mainly draws the following conclusions.Companies with financial restatements tend to reduce executive compensation and increcase the likelihood of executive change.Companies that have financial restatements will increase executive compensation in the event of executive change,and will reduce executive compensation if no executive changes occur.The conclusions of this paper enrich the relevant literature in the field of financial restatement and corporate governance,and explore how to effectively deal with the negative effects of financial restatement from the perspective of internal governance,in order to restore the reputation damage caused by financial restatement.lt is believed that listed companies should improve and optimize the internal governance structure and mechanism of the company,and also regulate the executive compensation incentives,so as to effectively reduce the occurrence of improper information disclosure such as financial restatement and maintain the healthy and stable development of the capital market.